TORONTO – Canada’s main stock index closed down Wednesday as the Bank of Canada cut its key interest rate by half a percentage point, while U.S. stock markets also fell.
The S&P/TSX composite index closed down 143.08 points at 24,573.62 in broad losses led by energy and tech.
In New York, the Dow Jones industrial average was down 409.94 points at 42,514.95. The S&P 500 index was down 53.78 points at 5,797.42, while the Nasdaq composite was down 296.47 points at 18,276.65.
Markets were down as investors have become jittery after a strong run-up of gains in recent months that in the U.S. has pushed valuations above historical norms, said Ian Chong, portfolio manager at First Avenue Investment Counsel.
“There’s a lot of anxiety in terms of earnings supporting the current valuation in the markets, because markets have been really strong.”
The S&P 500 is trading at multiples of 22 times earnings, compared with a historical average of 17 times, he said.
“It’s no wonder the markets are on edge regarding valuations, especially if they’re not supported by Q3 results.”
While it’s still early days this round of quarterly earnings, disappointing results from big names like Starbucks and Boeing, along with negative news from McDonald’s over food contamination, has helped put a damper on the outlook.
“You’ve got a lot of big companies surrounded by some negative sentiment.”
The looming election is also having an effect on markets, as concerns over spending increase.
“Regardless of who wins the White House, both parties are positioned to spend more, which means larger deficits,” said Chong.
“At some point that large debt balance has to be addressed.”
In Canada, the S&P/TSX composite index was weighed down by the energy index, which was down 1.2 per cent as crude oil fell. The information technology index was down 1.3 per cent as Shopify Inc. and others fell.
The day also saw the Bank of Canada cut its key interest rate to 3.75 per cent, in line with expectations.
The central bank largely maintained its economic outlook, which should see GDP growth strengthen to around two per cent in 2025 and 2.25 per cent in 2026, supported by lower interest rates.
For the Dec. 11 rate decision, markets are split on whether there will be another half-percentage-point cut, said Chong.
The Canadian dollar traded for 72.24 cents US compared with 72.33 cents US on Tuesday.
The December crude oil contract closed down 97 cents at US$70.77 per barrel and the November natural gas contract was up three cents at US$2.34 per mmBTU.
The December gold contract was down US$30.40 at US$2,729.40 an ounce and the December copper contract was down four cents at US$4.34 a pound.
This report by The Canadian Press was first published Oct. 23, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
